A three level location-inventory problem with correlated demand

Mehrdad Shahabi, Avinash Unnikrishnan, Ehsan Jafari-Shirazi and Stephen D. Boyles

Transportation Research Part B: Methodological, 2014, vol. 69, issue C, 1-18

Abstract: This paper considers a three level location-inventory problem where demand across the retailers is assumed to be correlated. We first present a reformulation scheme by which the initial formulation is transformed into a mixed integer conic quadratic program. In addition, we propose a solution approach based on an outer approximation strategy and show the algorithmic advantage of such framework for this class of programs. The results from numerical experiments show that the proposed solution procedure clearly outperforms state-of-the-art commercial solvers. In addition, we show that neglecting the effect of correlation can lead to substantially sub-optimal solutions.

Keywords: Joint location-inventory; Multi-echelon supply chain network design; Outer approximation (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (23)

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DOI: 10.1016/j.trb.2014.07.005

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